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New rules keep French real estate market functioning despite lockdown
Signing an agreement of sale, finalizing a property purchase, or carrying out home inspections are all once again possible following the publication of new regulatory texts in France.
It is now possible for people whose real estate projects have been put on hold during the lockdown to sign preliminary sales agreements and/or deeds of sale. Decree no. 2020-395 published on April 4, 2020 provides that notaries may draw up notarial deeds through a digital platform without the presence of the signatories until June 25, 2020 i.e. one month after the end of the “state of health emergency”. After this date, everyone will once again need to be present in the notary’s office in order to validate the transaction.
In addition to the possibility of video-calling, notaries have other digital tools that allow them to remotely verify the identity of the signatories and to make sure that these parties have received the right documents and understand the terms for signing electronically.
Despite these continuation efforts, not all offices are fully operational: according to the Fédération nationale de l’immobilier (FNAIM), 40% of offices are operating more or less normally, 40% have been heavily slowed down, and 20% are at a standstill.
“Moreover, although we may be well-equipped, progress is slow, particularly because we have to verify things with various administrative bodies and are dependent on responses from town halls concerning their pre-emptive right,” said Maître Nathalie Couzigou-Suhas, a Paris notary.
During a real estate transaction, cities can, in fact, use their pre-emptive right to replace buyers, and normally have two months to make their decision. The April 15 ordinance concerning Covid-19 timelines gives them until July 25 to make this decision.
Certain town halls, like Paris’s, have indicated that they will do their best to respond as quickly as possible, although this is not super feasible for all mairies. Some transactions therefore remain blocked for the time being.
Uncertainties regarding conditions precedent
With most deadlines pushed back until May 24, questions arose as to whether the normal withdrawal period for buyers under the promesse de vente, or sales agreement, would remain as is or whether the buyer could now terminate the agreement later. Normally, after signing, the buyer has ten days to cancel the agreement and recover any deposits made during signing without penalty.
The April 15 order indeed specified that this withdrawal period would not be extended after signing. “For some people who are confident in their purchase, or for sellers, this is good news but, for those who thought they had even more time to cancel, the situation could get complicated, as they might find out that their withdrawal period has already passed,” says Catherine Saint-Geniest, associate lawyer at the firm Jeantet.
Despite all of this, most buyers need to obtain a loan in order to purchase property and are able to withdraw from a potential sale if they fail to procure financing and conditions precedent have been included in the sales agreement. For the time being, however, a legal vacuum remains: we’re still not sure if and how conditions precent are being postponed.
“The best thing to do is to stick to the current practice in notarial offices, which is often to opt for an automatic extension of the deadline for obtaining the loan without exceeding the fixed deadline for the completion of the sales agreement,” said the Union of Real Estate Associations (Unis). Once the deadline has passed, the agreement to sell then becomes null and void.
The fact remains that sales agreements often last three months, during which time the borrower needs to secure a loan. This puts pressure on the banks, especially in the current climate. The only solution for people who wish to maintain their sales agreement is to sign an amendment to the agreement with the seller in order to extend the deadline.
Reduced activity for home inspections
And what about inspections? Although essential when signing the agreement to sell, home inspections, concerning everything from gas and electrical to asbestos, go against current lockdown rules and regulations.
The French Chambre des diagnostiqueurs immobiliers within FNAIM has therefore drawn up a best practices guide to be followed to unblock the situation. Inspectors will be able to carry out their duties within private homes that have been empty for 48 hours. Inspection activity will undoubtedly be very reduced with sheltering in place regulations.
Building permit postponements
For those who have applied for a building permit, application processing by administrative entities has been postponed until May 24. If the permit had been filed one month prior to the beginning of the state of emergency, it will still remain valid one month after the end of the state of emergency.
Without any response from the administration, the permit is supposed to be granted, but considering the current difficulties that French mairies are facing, it is preferable, as a precautionary measure, to obtain a firm, written response. Otherwise, the permit could be considered illegitimate.
And finally, for those wanting to appeal against a building permit: normally, those opposed to the construction project would have two months to act against the permit from the date of its posting, but for the time being, this two-month period has been put on hold and will resume at the end of the “state of health emergency”.